Contract analysis

I. Introduction and Purpose I write in my capacity as the responsible partner in the Bankruptcy & Restructuring practice of Calderwood & Harkness LLP on behalf of our client, Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF"), a Cayman Islands exempted company with its principal office at 280 Park Avenue, 38th Floor, New York, NY 10017. Driftwood's investment activities are directed by its investment manager

II. Background and Procedural Context A. The Chapter 11 Filing Cascabel Financial Holdings, Inc. ("Cascabel" or "CFH"), a Delaware corporation (EIN: 84-3291057), and its wholly owned subsidiary, Cascabel Asset Management LLC ("CAM"), a Delaware limited liability company (together, the "Debtors"), filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptc

III. Proposed Enhanced Adequate Protection Package Driftwood proposes the following Enhanced Adequate Protection Package for the benefit of all holders of pre-petition first lien claims under the Pre-Petition First Lien Term Loan other than Driftwood (collectively, the "Protected Lenders"), including Velthorn National Bank, N.A. (holding $38,000,000), Pinnacle Credit Partners Fund II, LP (holding $28,000,000), and Br

IV. Budget and Reporting Protections As an additional element of protection for the Protected Lenders, Driftwood notes that the DIP Credit Agreement already contains robust budget and reporting provisions that provide transparency into the Debtors' financial position and liquidity profile. Specifically: The DIP Credit Agreement requires the Debtors to maintain a 13-week rolling cash flow budget (the "DIP Budget"), wh

V. Basis for Adequacy of Protection Driftwood submits that the Enhanced Adequate Protection Package, taken as a whole, more than satisfies the requirements of Section 364(d)(1)(B) of the Bankruptcy Code, which provides that a court may authorize the obtaining of credit secured by a senior or equal lien on property that is subject to a prior lien only if "the interest of the holder of such lien is adequately protected

VI. Proposed Documentation and Timeline Driftwood proposes that the Enhanced Adequate Protection Package be memorialized in a written stipulation (the "Adequate Protection Stipulation") to be negotiated among the relevant parties and filed with the Court in advance of the final hearing. The Adequate Protection Stipulation would be submitted as a companion to, or incorporated into, the proposed Final DIP Order. The pa

VII. Withdrawal of Objection Upon execution of the Adequate Protection Stipulation by the parties and entry of the Final DIP Order by the Court, the Ad Hoc Group shall withdraw the Ad Hoc Group Objection filed on September 19, 2023 (D.I. 72) with prejudice. The Ad Hoc Group shall not oppose entry of the Final DIP Order or the approval of the roll-up of Driftwood's $32,000,000 in pre-petition first lien claims into su

VIII. Reservation of Rights This letter constitutes a settlement proposal and is made without prejudice to any and all of Driftwood's rights, remedies, claims, and defenses, whether arising under the Bankruptcy Code, the DIP Credit Agreement, the Pre-Petition First Lien Term Loan, applicable non-bankruptcy law, or otherwise. Nothing contained herein shall constitute, or be deemed to constitute, an admission by Driftw

IX. Closing and Response Requested We respectfully request that you discuss this proposal with your clients, Velthorn National Bank, N.A. and Pinnacle Credit Partners Fund II, LP, and provide us with the Ad Hoc Group's response by close of business on Friday, October 6, 2023. We appreciate that this timeframe is tight, but believe the proposal as presented is comprehensive and commercially reasonable, and that an exp